F8 Presentation

June 2014

Abdus Salam Jan FCA, FPFA

Topic List
1. Introduction to assurance
2. Rules and Regulation 3. Ethics and acceptance 4. Risk 5. Planning 6. Evidence 7. Systems and controls 8. Procedures 9. Completion and review 10. Reporting

11. Corporate governance

12. Internal audit

Chapter 1
Introduction to Assurance

Chapter 1.
1. 2.

what is assurance?

What is assurance?
Assurance in the context of a company

3.
4. 5. 6.

Types of assurance engagements

Audit Engagements Review Engagements Expectation Gap

What is the difference between Financial Accounting & Financial Reporting?

Financial Accounting
Financial accounting is preparing financial data of a company's financial performance, financial position and cash flows for an accounting period.

Financial Reporting
Financial reporting is presenting financial data to the users, of a company's financial performance, financial position and cash flows for an accounting period.

Users of financial statements & their Needs

C
CUSTOMERS

I
INVESTORS

S
SUPPLIERS

L
LENDERS

M
MANAGEMENT

E
EMPLOYEES

P
PUBLIC

G
GOVT.

Informational Needs of Users

Investors
are interested in their potential profits and the security of investment.

Suppliers
need to know if they will be paid.

Customers
need to know that a company can continue to supply them.

Employees
need to know if an employer can offer secure employment pay rises.

Lenders
need to know if they will be repaid.

Government
The tax authorities also use financial statements to assess tax.

Public
may wish to assess the effect of the company on the economy.

Managements Informational Needs

Management can also use financial statements, however, they would predominantly use monthly management accounts as their main source of financial information and not the financial accounts. As a preparer of financial statements they have to cater the needs of other external users.

Separation of Ownership from Management

Ownership

Management

Separation of Ownership from Management

Ownership Management

Separation of Ownership from Management

Ownership

Management

Audit & Assurance Services by independent auditor become vital when MANAGEMENT of business is separated from OWNERSHIP to ensure more transparency in financial reporting.

Separation of Ownership from Management

Ownership

Auditor

Management

Audit & Assurance Services by independent auditor become vital when MANAGEMENT of business is separated from OWNERSHIP to ensure more transparency in financial reporting.

What Audit & Assurance do?

Audit & Assurance enhances the

CONFIDENCE
of users of financial statements and reduces the risk.

Components of Assurance Engagement

Practitioner
Responsible Party

Subject Matter Criteria Evidence

Intended User

Conclusion

Types of Assurance Engagement

There are two types of assurance engagement a practitioner is permitted to perform: A reasonable assurance engagement (positive but not absolute) & A limited assurance engagement. (moderate & negative).

Moderate

Negative Assurance Reasonable

Positive Assurance

Objective of External Audit

The objective of an audit of financial statements is to enable the auditor to
express an opinion whether statements are prepared, in all material respects, in accordance with an applicable financial reporting framework.
An audit of financial statements is an assurance engagement.

the

financial

Types of Assurance Services

Limitations of an audit
Use of estimation in financial information
Inherent limitations of control used as audit evidence

Evidence is persuasive not conclusive Can not review 100% of the transactions
Representation from management as only evidence.

Extras

I F R Ss

Extras

Fair Presentation & Compliance with IFRSs

Extras

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